Deferred Tax Research Articles

PROPERTY TAX DEFERRAL: A PROPOSAL TO HELP MASSACHUSETTS SENIORS

Massachusetts citizens, like those in other states, face the prospect of inadequate retirement income. Social Security will provide less relative to pre-retirement earnings; 401(k) balances are generally meager; and half the private sector workforce does not have an employer-sponsored retirement plan. At the same time, the number of years spent in retirement has increased dramatically; health care costs are high and rapidly rising; and interest rates are at historic lows. In addition to these nationwide challenges, Massachusetts’ older residents face extraordinarily high housing costs and, as a result, rank among the most disadvantaged in terms of the gap between their required and actual resources. The three big levers to improve the retirement income situation are: 1) encourage people to work longer; 2) provide coverage for employees who do not have a retirement savings plan at work; and 3) enable older households to tap their home equity. States can assist on all three fronts to help individuals use their own resources to support themselves in retirement. They can publicize the advantage to individuals of staying in the labor force and to companies of hiring and retaining older workers. They can institute programs that require employers without a retirement plan to automatically enroll their workers in an Individual Retirement Account. And they can offer a program of property tax deferral that will enable homeowners to use some of their home equity to augment inadequate retirement income. This brief focuses on the third option, exploring one possible approach to property tax deferral that uses Massachusetts as an example. The discussion proceeds as follows. The first section describes the nation’s retirement income challenge and the particular problem created by Massachusetts’ high housing costs. The second section describes the major existing programs for homeowners’ relief in Massachusetts: two that cost the taxpayer and one that allows low-income homeowners to help themselves through limited property tax deferral. The third section describes a proposal for a new statewide program of property tax deferral that would be open to all homeowners. The fourth section addresses likely utilization and startup costs before the program becomes self-financing. The final section concludes that a comprehensive property tax deferral program offers enough promise to at least be tried as a pilot.

Accounting Information and Deferred Taxation: Evidence from Deposit Money Banks in Nigeria

This study assesses the effect of accounting information on deferred taxation in Nigerian deposit money banks. The specific objectives are to; evaluate whether earnings per share has effect on deferred tax items of Nigerian deposit money banks and established how cash flow affected deferred tax items of Nigerian deposit money banks. Ex post Facto research design was adopted and the data were collected from annual reports and accounts of Nigerian deposit money banks. Pooled multiple regression analysis was employed to test the formulated hypotheses. Based on the analysis, the study found that earnings per share (EPS) and Cash flow (CASHFL) impact negatively on our dependent variable, deferred tax, but book value of equity impact was statistically significant while earnings per share (EPS) and Cash flow (CASHFL) impact were not statistically significant. The study therefore recommends among others that Since the basis of effectiveness of generating earnings (EPS) to retire deferred tax of the banks does not perform better as the analysis revealed should be should be ignored as a determinant of deferred tax in Nigeria.

The Pricing and Performance of Supercharged IPOs

ABSTRACTThis study examines a new form of initial public offerings, “supercharged” IPOs, where a firm-organized pre-IPO as a pass-through entity undergoes a series of transactions that steps-up the adjusted tax basis of the IPO firm's assets. This step-up imposes tax liabilities on pre-IPO owners, but also creates significant future tax benefits for the firm; the average anticipated deferred tax asset is $486 million ($13 per share) for our sample of supercharged IPO firms. Pursuant to tax receivable agreements, supercharged IPO firms pay a large portion of these tax benefits to pre-IPO owners as they are realized in the future. Future firm performance must be sufficiently strong for the IPO firm and the pre-IPO owners to realize the future tax benefits created by the supercharged transaction structure. We hypothesize and provide evidence of higher IPO offer prices and stronger future performance for supercharged IPO firms relative to traditional IPO firms.JEL Classifications: G14; G32; G34; H25.

Company stock price reactions to the 2016 election shock: Trump, taxes, and trade

Donald Trump's surprise election shifted expectations: corporate taxes would be lower and trade policies more restrictive. Relative stock prices responded appropriately. High-tax firms and those with large deferred tax liabilities (DTLs) gained; those with significant deferred tax assets from net operating loss carryforwards (NOL DTAs) lost. Domestically focused companies fared better than internationally oriented firms. A price contribution analysis shows that easily assessed consequences (DTLs, NOL DTAs, tax rates) were priced faster than more complex issues (net DTLs, foreign exposure). In sum, the analysis demonstrates that expectations about tax rates greatly impact firm values.

2018 Tax Code

This note reviews the new Tax Code introduced in Kazakhstan effective 1 January 2018, which includes provisions on online retail trading, subsoil use, taxpayer diligence, introducing amendments to the Tax Code, information exchange, the statute of limitations, deferral of taxes and payment of taxes by way of instalments, forced liquidation of taxpayers, horizontal monitoring, tax audits, income tax, corporate tax, VAT and the taxation of non-residents.

The Intersection of EU State Aid and US Tax Deferral: A Spectacle of Fireworks, Smoke, and Mirrors

The Advance Pricing Agreements or transfer pricing rulings granted to U.S. multinationals by Ireland, the Netherlands, and Luxembourg were principally designed to achieve U.S. tax deferral and not EU tax avoidance. Adverse BEPS effects within the European Union would be immaterial in comparison to the deferral of U.S. tax on residual IP-related profits, and would have occurred primarily in countries other than those charged with the granting of unlawful State aid. The Irish, Dutch, and Luxembourgish treasuries have not foregone tax revenues in favor of the U.S. multinationals they allegedly aided, which is a requirement for a finding of prohibited State aid. However, the conduct of these low-tax EU States, which enables the deferral of U.S. tax and facilitates the accumulation offinancial capital within the European Union may benefit such countries possibly at the expense of other EU Member States, and can therefore be viewed as a form of tax competition that is questionable in light of the EU Code of Conduct. Conversely, if the retroactive State aid charges were to prevail, the U.S. Treasury would forfeit its claim over unrepatriated earnings of U.S. multinationals. The significant tax policy implications for both Europe and the United States resulting from the State aid decisions by the EU Commission are explored here in detail.

Discussion of ‘Making Deferred Taxes Relevant’

In this discussion of Brouwer and Naarding's article ‘Making Deferred Taxes Relevant’, which is published in this issue of Accounting in Europe, I question several aspects of their proposal to change the tax accounting standard. I argue that a quest for more value relevance of individual balance sheet items is not a good guideline for accounting standard setting. The distinction between book-first and tax-first temporary differences may be helpful for some analytical purposes, but it is not sufficiently robust to serve as a basis for an accounting standard. However, I agree with the authors that the efforts to improve IAS 12 should not be abandoned.

Pengaruh Manajemen Laba dan Ukuran Perusahaan pada Beban Pajak Tangguhan

Indonesian is one of the countries that rely on tax revenue as the main source of state income. The income tax-oriented accounting method of accounting recognizes deferred tax liabilities and assets against future fiscal consequences caused by temporary differences and residual losses that have not been compensated. The temporary differences that lead to an increase in future tax amount will be recognized as deferred tax liabilities, therefore the company must recognize a deferred tax burden. The purpose of this study is to obtain empirical evidence of the influence of earnings management and firm size on deferred tax expense. The sample in this study is a company listed on the Indonesia Stock Exchange in 2012-2016 amounting to 10 companies using purposive sampling method. Deferred tax expense can be measured by the total deferred tax expense per year divided by the total assets of the company per year. The results showed that earnings management had a negative effect on deferred tax expense, and firm size had a positive effect on deferred tax expense

Grants and tax subsidies as the main forms of state aid – a perspective of the state of public finance

State aid according to Article 107 par. 1 TFEU brings economic advantage to certain enterprises or productions of certain goods, excluding others. In other words, the given measure cannot be regarded as State aid, if it does not bring any benefits to the addressed entity. State aid may therefore be described as the selective increment of financial benefits to an enterprise or a group of enterprises, which at the same time is accompanied by formation of a financial burden on the side of public finances. This burden may be in the form of public spending to enterprises or reducing the regulatory burdens imposed on the enterprises. In the first case it will be aid provided by active support mechanisms, such as grants, interest rate subsidies on bank credits, refunds, preferential and conditionally discharged loans, sureties, and credit guarantees. In the second case it will be the aid provided by tax exemptions and tax deferrals (tax subsidies), the conversion of enterprise debt to capital, or postponing the payment of specific public contributions. The subject of the article is to present the conditions of admissibility of State aid in the European Union. This should lead to verify the hypothesis of the influence of State aid on the state of public finance in EU Member States which provided State aid in the form of grants and tax subsidies in the years 2000–2016. This analysis is carried out based on the linear regression model. The response variable (dependent variable Y) is the size of the general government sector debt, and explanatory variable (independent variable X) is state aid in the form: 1) grants; 2) tax exemptions and tax deferrals. In the other words, the hypothesis highlights that State aid in the form of grants and tax subsidies, in respect to the whole European Union and particularMember States, should be positively correlated with the size of the general government sector debt. Results: The conducted analysis of regression indicated that State aid in the form of grants and tax subsidies (tax exemptions + tax deferrals) and the size of the general government sector debt are linearly dependent – respectively regarding 22 and 14 Member States, which in the years 2000–2016 provided State aid in these forms.

Should the Government Be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets?

Under standard assumptions, both individuals and the government are indifferent between traditional tax-deferred retirement accounts and “front-loaded” (Roth) accounts. When we add investment fees to this benchmark, individuals are still indifferent but the government is not. We estimate that tax deferral increases demand for asset management services by $3 trillion, causing the government to pay $20.7 billion in corresponding annual fees. In a general equilibrium model with asset management services as differentiated products, we examine the incidence and welfare implications of the added demand. Tax deferral in our model produces a larger asset management industry, higher taxes, and lower social welfare.

PENGARUH BEBAN PAJAK TANGUHAN, LEVERAGE TERHADAP MANAJEMEN LABA RIIL

This study aims to provide empirical evidence of the effect of deferred tax expense and leverage to earnings management through manipulation of real activity in the manufacturing companies listed in Indonesia Stock Exchange in 2010-2016. The sample in this study are 127 manufacturing companies listed on Indonesia Stock Exchange (IDX) during 2010-2016 period. The method of analysis used is descriptive statistics, hypothesis test using multiple regression analysis. The results of this study prove that variable deferred tax expense and leverage simultaneously have a significant effect on earnings management through real activities manipulation. However partially deferred tax expense is not affected and leverage has significant negative effect.Keywords: Deferred Tax Expense, Leverage, Earnings Management, Real Activity.

The impact of deferred tax on company valuations in the case of mergers

The impact of deferred tax on company valuations in the case of mergers The aim of the paper is to fill the gap in the literature related to the disclosure of relevant deferred tax value in accounting under a merger in relation to the valuation of the participating companies. Apart from a description, methods of analysis, synthesis, and comparison are used in this paper as well. The model example shows possible methods of accounting solutions and their influence on the value of assets with a different approach to this solution. Non-disclosure of deferred tax in the opening balance sheet could have a negative impact on the economic decision-making of the acquiring company. The aim of this paper is also to raise the debate at the international level about the extent to which deferred tax should be reflected in the expert valuation of companies or whether it is a purely accounting problem.

Introduction of Corporate Income Tax Deferral As an Essential Factor for Economic Development of Latvia

The study considers feasibility of introduction of corporate income tax deferral until distribution of enterprise profits aimed to accelerate economic growth, increase budget revenues and raise welfare of the population of Latvia. The study analyses the effect of introduction of corporate income tax deferral until distribution of enterprise profits considering the experience of Estonia, where this strategy has been implemented since 2000. The study provides comparative analysis of some indicators on micro and macro levels, such as entrepreneurial activity, tax revenue and foreign direct investment in Estonia and Latvia for the period of twenty years. As a result of the analysis, the authors reveal the effect of the introduction of the corporate income tax deferral until distribution of enterprise profits on the Estonian economy on the level of enterprises and on the macro level, as well as the strength and duration of the effects of the 2000 tax reform in Estonia. The authors have also made a forecast regarding possible additional growth of GDP and budget revenues in Latvia in case of introduction of corporate income tax deferral until distribution of enterprise profits. It has been concluded that the increase in additional budget revenues is a secondary effect, which depends on the qualitative and quantitative growth of the enterprises and investment activity of the enterprises and individuals (investing in enterprises). The study shows the reasons for additional growth of GDP and budget revenues in Latvia in case corporate income tax deferral is introduced.

Accounting quality deferred tax and risk in the banking industry

This study attempts to provide evidence of the relation between capital structure, stock crash-risk and deferred taxation. Using a sample of banks domiciled in Eurozone countries and stock crash risk measures that capture both medium and extreme risk, the study shows that the recording of deferred tax components leads, in some instances, related to capital structure, to future stock crash risk. Further investigation reveals that this result is incrementally driven by banks domiciled in southern Europe. Moreover, controlling for the existence of profitability based on the prescriptions of International Accounting Standard (IAS) 12 for the recording of deferred tax assets, the study shows that banks with high deferred tax assets domiciled in crisis-affected countries have lower future stock crash risk. In this respect, these results likely imply that recording deferred tax in a manner better reflecting the provisions of accounting standards may not increase the likelihood of a future stock crash. However, for banks with capital-structure problems domiciled in crisis-affected countries, high deferred tax assets lead to higher likelihood of future crash risk.

Accounting quality deferred tax and risk in the banking industry

This study attempts to provide evidence of the relation between capital structure, stock crash-risk and deferred taxation. Using a sample of banks domiciled in Eurozone countries and stock crash risk measures that capture both medium and extreme risk, the study shows that the recording of deferred tax components leads, in some instances, related to capital structure, to future stock crash risk. Further investigation reveals that this result is incrementally driven by banks domiciled in southern Europe. Moreover, controlling for the existence of profitability based on the prescriptions of International Accounting Standard (IAS) 12 for the recording of deferred tax assets, the study shows that banks with high deferred tax assets domiciled in crisis-affected countries have lower future stock crash risk. In this respect, these results likely imply that recording deferred tax in a manner better reflecting the provisions of accounting standards may not increase the likelihood of a future stock crash. However, for banks with capital-structure problems domiciled in crisis-affected countries, high deferred tax assets lead to higher likelihood of future crash risk.

Balance sheet classification and the valuation of deferred taxes

The Financial Accounting Standards Board recently issued Accounting Standards Update 2015–17, which will require firms to classify all deferred tax assets and liabilities as noncurrent in classified balance sheets instead of separating them into current and noncurrent amounts. This change is designed to simplify the reporting of deferred taxes and align with International Financial Reporting Standards. This study conducts empirical analyses on a broad cross-section of publicly traded U.S. firms in order to examine the stock market's valuation of current and noncurrent deferred tax assets and liabilities. The results suggest that classifying all deferred taxes as noncurrent may adversely affect the usefulness of financial statements for equity investors.

Análise da Alíquota Efetiva de Tributos Sobre o Lucro no Brasil: Um Estudo com foco na ETRt e na ETRc

Esse estudo teve como objetivo analisar a alíquota efetiva de tributos sobre o lucro de empresas de capital aberto atuantes no Brasil no período de 2003 e 2013, tanto em relação à alíquota efetiva total (ETRt) quanto à alíquota efetiva corrente (ETRc), buscando verificar indícios da presença de gerenciamento tributário. Esta análise consiste em (i) avaliar se a alíquota média apresenta uma carga superior, igual ou inferior à nominal de 34%; (ii) verificar se a ETR sofreu influência dos ajustes do RTT decorrente da introdução dos IFRS; (iii) identificar proxies (tamanho, rentabilidade, índice de estoques, índice de imobilizado, endividamento, despesas tributárias diferidas) que possam explicar a variação da ETR. De maneira geral, os resultados mostraram que: (i) as empresas apresentam uma ETR significativamente menor que a alíquota prevista na legislação; (ii) no período de adoção plena dos IFRS as empresas apresentaram uma ETR inferior; (iii) a ETR possui relação com tamanho (negativa), endividamento (positiva) e componentes do ativo (positiva); e (iv) há indicação de diferimento de tributos considerando-se o sinal negativo de tributos diferidos em relação à ETRc. Os resultados confirmam a prática de gerenciamento tributário e demonstram também que os ajustes decorrentes do RTT implicaram em uma carga fiscal menor, corroborando estudos anteriores que estimaram lucros menos conservadores após o início do processo de convergência. Finalmente, observou-se que empresas de maior porte apresentam menor carga fiscal e que em geral as empresas adotam escolhas que permitem o diferimento dos tributos sobre o lucro.

Wybrane determinanty zmian dochodów podatkowych samorządu terytorialnego w Polsce w latach 1999–2014

Tax revenue is a very important, but also relatively variable part of Polish local governments’ revenue. During the years 1999–2014, tax revenue value was determined by a number of various factors, often with a contradictory impact. These factors include, above all, statutory changes in tax revenue share in the revenue of the state budget and the use of tax relief, exemptions and deferrals in both municipal and state taxes.

Detecting Earning Management: Deferred Taxes vs Accruals: A Pakistani Perspective

Objective: Earning Management has been one of the major areas of accounting research which has received a great attention in the past and also quite recently. Detecting earning management has always been one of the major areas of concern for the researchers. Earnings Management is pervasive. There are a number of models available to Detect and measure the earnings management activity.
 Methodology: The accrual models are the most used models to proxy the discretionary accruals and the earnings management. The effectiveness of the accrual models is somewhat skeptical at times when researchers found some inconsistencies in results while using the accrual models. The researchers are still finding some better and effective model that can be used to better measure and capture the earnings management activity. The focus of this study is to find out as to whether a deferred tax as compared to accrual models is more useful in measuring or detecting the earnings management in Pakistani perspective. The study is based on the Pakistani companies listed on the Karachi Stock Exchange (KSE). This study is expected to be an addition to the existing research as to whether the models used for detecting earnings management through deferred taxes by Philips et al (2003) are also applicable to Pakistani Scenario which is a developing country. The study used Probit Regression Model with pooled cross sectional data to measure the usefulness of both; accruals and deferred taxes (the proxies) used as better measure for Earnings management.
 Results: The results of the study are inconsistent with the Philips et al. (2003) study. Based on this study it is concluded that deferred tax is not incrementally useful along with the other accrual measure. The accruals models show significant results and are more powerful metric to detect earnings management as compared to the deferred taxes in Pakistan.

Business Combinations, Goodwill and Deferred Taxes: Evidences Emerging From a Comparative Analysis Between Italy and Bulgaria

Business Combinations, Goodwill and Deferred Taxes: Evidences Emerging From a Comparative Analysis Between Italy and Bulgaria